1. What Section 23 does
Section 23 identifies persons who are outside the ordinary GST registration requirement because of the nature of their supplies or because a notification specifically exempts them.
It is important to understand Section 23 as a registration-liability provision. It does not itself decide whether a particular supply is taxable, exempt, nil-rated or outside the levy. Those questions are determined under the charging provisions, exemption notifications and the IGST framework. Section 23 then asks whether the person, considering those supply characteristics, is required to obtain registration.
Section 23 must nevertheless be read with Section 22 and Section 24, because compulsory-registration provisions can alter the result and notification-based exemptions can create specific exceptions.
2. Complete statutory structure
| Provision | Rule | Practical meaning |
|---|---|---|
| 23(1)(a) | Exclusive business of supplies not liable to tax or wholly exempt | Such a person is not liable to registration under the Act. |
| 23(1)(b) | Agriculturist | No registration to the specified extent of supply of produce out of cultivation of land. |
| 23(2) | Government notification power | Government may, on GST Council recommendation, notify additional categories exempt from obtaining registration. |
The CBIC-published CGST Act reproduces Section 23 in this structure. citeturn0search21turn0search1
3. Section 23(1)(a) — exclusively non-taxable or wholly exempt supplies
Section 23(1)(a) covers a person engaged exclusively in the business of supplying goods or services or both that are either:
- not liable to tax under the CGST Act or IGST Act; or
- wholly exempt from tax under the CGST Act or IGST Act.
The word exclusively is crucial. If the person makes even a taxable supply that falls outside the Section 23(1)(a) category, the conclusion may change and the ordinary Section 22/compulsory Section 24 analysis must be performed.
4. What does “not liable to tax” mean?
“Not liable to tax” is different from merely having a low GST rate. It concerns supplies that are outside the levy under the applicable GST law.
CBIC's FAQ explains that “not liable to tax” refers to supplies that are not leviable to tax under the CGST/SGST/IGST framework. citeturn0search2
| Situation | Section 23 analysis |
|---|---|
| Supply outside GST levy | Can fall within 23(1)(a) if the person's business is exclusively such supplies. |
| Exempt supply | Can fall within 23(1)(a) if the person exclusively makes wholly exempt supplies. |
| Nil-rated supply | Generally part of the exempt/non-taxable registration analysis; confirm the legal classification for the relevant supply. |
| Zero-rated export | Not the same as exempt supply; exports are taxable supplies at zero rate and should not automatically be treated as Section 23(1)(a) supplies. |
5. Wholly exempt supplies
A person dealing exclusively in goods or services wholly exempt from GST can fall outside registration under Section 23(1)(a), even if the value of those exempt supplies is substantial.
Trader supplies only goods that are wholly exempt under the applicable exemption schedule.
Supplier provides only services covered by an applicable exemption notification.
Large exempt turnover does not by itself create Section 22 registration liability.
One taxable outward supply can change the analysis.
CBIC's FAQ specifically confirms that a person dealing in 100% exempt supplies is not required to register even if turnover exceeds ₹20 lakh. citeturn0search2
6. Mixed taxable and exempt business
This is where many businesses incorrectly rely on Section 23.
Suppose a trader has ₹30 lakh of exempt supplies and ₹2 lakh of taxable supplies. The person is not “exclusively” engaged in exempt supplies. Section 23(1)(a) therefore cannot simply be used to ignore the ₹2 lakh taxable business. The complete Section 22 and Section 24 analysis must be performed.
7. Agriculturist — Section 23(1)(b)
An agriculturist is not liable to registration to the extent of supply of produce out of cultivation of land.
The protection is tied to the agriculturist's produce from cultivation of land. It should not be expanded automatically to every business activity undertaken by a person who also happens to be an agriculturist.
| Activity | Analysis |
|---|---|
| Sale of own agricultural produce from cultivation | Section 23(1)(b) protection applies to that supply. |
| Separate taxable trading business | Must be analysed independently under Sections 22–24. |
| Processing/manufacturing beyond ordinary agricultural activity | Check whether the resulting supply remains agricultural produce or becomes a taxable business activity. |
8. “Produce out of cultivation of land” — practical boundary
The statutory language focuses on produce arising from cultivation of land. Therefore, documentation should establish the person's status and the source of the goods supplied.
If the person starts buying goods from third parties for resale, the analysis may shift because those goods are not simply produce from the person's cultivation.
9. Section 23(2) — notification-based exemption power
Section 23(2) gives the Government power, on the recommendation of the GST Council, to notify categories of persons who may be exempted from obtaining registration.
This subsection is important because the registration system is not limited to the two categories expressly written into Section 23(1). Over time, the Government has used the notification mechanism to exempt specified persons, subject to conditions.
10. Inter-State suppliers of services — notification-based exemption
Section 24 generally contains compulsory registration for persons making inter-State taxable supplies. However, Section 23(2) has been used to create exemptions from registration for specified categories.
Notification No. 10/2017-Integrated Tax dated 13 October 2017 exempts persons making inter-State supplies of taxable services from registration where the prescribed aggregate value does not exceed the threshold stated in the notification, subject to its conditions.
CBIC's notification list identifies Notification 10/2017-Integrated Tax as the notification exempting persons making inter-State taxable supplies of services from registration under Section 23(2). citeturn0search0
11. Job-worker registration exemptions
Job workers require a careful interaction of Sections 22, 23 and 24.
CBIC Circular 88/07/2019-GST explains that a job worker generally becomes liable based on aggregate turnover under Section 22 where the principal and job worker are in the same State. Where the job worker makes inter-State supplies of services, Section 24 can otherwise create compulsory registration, but Notification 10/2017-Integrated Tax provides an exemption for qualifying inter-State taxable service supplies within the specified threshold. citeturn0search22
12. Handicraft suppliers — historical notification exemption
Notification No. 8/2017-Integrated Tax dated 14 September 2017 exempted specified persons making inter-State taxable supplies of handicraft goods from registration, subject to the notified aggregate-turnover limits and conditions. CBIC's notification itself records the ₹20 lakh general and ₹10 lakh special-category limits in its original framework. citeturn0search25
This is an important example of Section 23(2): the exemption is not created by Section 23(1) itself; it operates through a Government notification made under the statutory enabling power.
13. E-commerce service exemptions
Notification-based registration exemptions have also existed for specified service suppliers making supplies through electronic commerce platforms, subject to the applicable conditions and threshold.
CBIC's GST concept/status material records exemptions for specified service suppliers with turnover up to ₹20 lakh making inter-State supplies and supplies through e-commerce platforms. citeturn0search24
Because e-commerce GST provisions have undergone significant amendments, the current position should be checked against the specific service, ECO role, Section 9(5) treatment and the notification applicable to the relevant date.
14. Voluntary registration is different from Section 23 exemption
A person who is not liable to registration may still choose voluntary registration under Section 25(3). Once voluntarily registered, the registered-person provisions apply.
CBIC's FAQ confirms that a person not liable under Section 22 can obtain voluntary registration and thereafter the provisions applicable to registered persons apply. citeturn0search23
15. Section 22 interaction
Section 22 asks whether ordinary turnover-based registration liability arises. Section 23 then removes liability for specified persons.
| Question | Provision |
|---|---|
| Has the person crossed the ordinary threshold? | Section 22. |
| Is the person exclusively exempt/non-taxable or an agriculturist to the specified extent? | Section 23(1). |
| Has Government issued a specific registration exemption? | Section 23(2). |
| Is there a compulsory-registration category? | Section 24. |
16. Section 24 interaction
Section 24 begins with a non-obstante clause and creates compulsory registration in specified cases notwithstanding Section 22(1). Therefore, a person relying on Section 23 must still check whether a compulsory-registration provision applies and whether a notification specifically exempts that category.
Examples include certain inter-State supplies, casual taxable persons, specified reverse-charge taxpayers and other categories listed in Section 24.
CBIC's statutory text confirms the Section 24 non-obstante structure. citeturn0search1
17. Detailed practical examples
Example 1 — only exempt goods
A trader sells only wholly exempt goods. Even if turnover is ₹50 lakh, Section 23(1)(a) can keep the trader outside registration, subject to the exact classification and absence of a compulsory-registration rule.
Example 2 — exempt + taxable goods
A trader sells ₹30 lakh exempt goods and ₹3 lakh taxable goods. The exclusive-supply condition is lost; Section 22/24 must be tested.
Example 3 — agricultural produce
An agriculturist sells produce from cultivation of the person's land. Section 23(1)(b) applies to that supply.
Example 4 — farmer starts trading
The same farmer buys ₹25 lakh of agricultural goods from other farmers and resells them. That trading activity should be analysed separately; Section 23(1)(b) does not automatically cover the purchased stock.
Example 5 — inter-State consultant
A consultant provides inter-State taxable services but remains within the threshold specified in the applicable Section 23(2) notification. Registration should be tested under the notification rather than applying Section 24 in isolation.
Example 6 — inter-State goods supplier
A small trader supplies taxable goods inter-State. The relevant compulsory-registration rule and any applicable notification must be checked; the service-specific Notification 10/2017-IGST exemption cannot simply be extended to goods.
Example 7 — job worker
A job worker supplies processing services inter-State. Examine Section 24(i), Notification 10/2017-IGST and the job-work-specific guidance together.
Example 8 — voluntary registration
An exempt-only business voluntarily registers. Thereafter it must comply with the obligations applicable to registered persons.
Example 9 — mixed services
A consultant supplies an exempt educational service and a taxable advisory service. Section 23(1)(a) cannot be used because the business is not exclusively exempt.
Example 10 — high exempt turnover
A person has ₹2 crore of wholly exempt supplies and no taxable outward supply. High turnover alone does not defeat Section 23(1)(a).
18. Construction and business examples
| Scenario | Section 23 analysis |
|---|---|
| Contractor provides taxable works-contract services | Not an exempt-only business; Section 22/24 applies. |
| Person supplies only wholly exempt services | Section 23(1)(a) may apply irrespective of turnover. |
| Contractor also sells taxable scrap/materials | Review whether the business remains exclusively exempt/non-taxable. |
| Farmer sells own cultivated produce | Section 23(1)(b) applies to that produce. |
| Group entity provides taxable inter-State services below threshold | Check Section 24 and the applicable Section 23(2) exemption notification. |
19. Registration decision workflow
PAN and legal constitution.
Goods, services and other supplies.
Taxable, exempt, nil-rated, non-taxable or zero-rated.
Calculate aggregate turnover.
Is the business exclusively exempt/non-taxable?
Is the person an agriculturist supplying own cultivated produce?
Is a specific notification available?
Does compulsory registration apply?
State, threshold, nature of supply and exclusions.
Record legal basis and effective date.
20. Internal controls
| Control | Frequency | Purpose |
|---|---|---|
| Supply classification master | Continuous | Identify taxable/exempt/non-taxable supplies. |
| Registration threshold dashboard | Monthly | Track Section 22 exposure. |
| Section 23 exemption register | Quarterly | Confirm exemption conditions. |
| Section 24 trigger checklist | Monthly/event-based | Identify compulsory registration. |
| Notification tracker | Continuous | Monitor changes to exemption conditions. |
| New-contract review | Before commencement | Identify new taxable/inter-State supplies. |
21. Documentation to support a Section 23 position
- PAN and constitution documents.
- Complete outward-supply classification.
- GST exemption notifications applicable to each supply.
- Evidence that supplies are wholly exempt/non-taxable where Section 23(1)(a) is claimed.
- Land/cultivation records for agriculturist claims.
- Sales invoices and purchase records.
- Inter-State supply analysis.
- Section 24 compulsory-registration assessment.
- Specific Section 23(2) notification and conditions.
- Historical notification copies for past periods.
- Contracts supporting job-work or service-provider status where relevant.
22. Legislative and notification development
23. GST Council background
The GST Council's role is particularly important under Section 23(2), because the Government's notification power operates on the Council's recommendation.
| Development | Importance |
|---|---|
| Original GST registration design | Established the basic Section 22/23/24 architecture. |
| 2017 registration exemptions | Specific categories such as handicraft suppliers and qualifying inter-State service suppliers received notification-based relief. |
| 2018–2019 job-work clarifications | Registration treatment of job workers was clarified through notifications/circulars. |
| Later GST reforms | Registration exemptions have continued to depend on the precise category, turnover and conditions in the applicable notification. |
The official CBIC notification archive demonstrates that Section 23(2) has been used for category-specific registration exemptions. citeturn0search0
24. Common mistakes
- Assuming every exempt-looking supply is legally exempt without checking the notification.
- Ignoring the word exclusively in Section 23(1)(a).
- Treating zero-rated exports as ordinary exempt supplies.
- Assuming high exempt turnover automatically creates registration liability.
- Assuming an agriculturist exemption covers separate trading or service businesses.
- Ignoring Section 24 compulsory registration.
- Applying a historical notification to a current transaction without checking amendments.
- Applying a current notification to a historical dispute without checking its effective period.
- Ignoring conditions in Section 23(2) notifications.
- Confusing Section 23 registration exemption with exemption from GST on the underlying supply.
26. Key takeaways
- Section 23 is a registration-liability provision, not an exemption from GST on the supply itself.
- Section 23(1)(a) requires exclusive business in supplies not liable to tax or wholly exempt supplies.
- Agriculturists are protected under Section 23(1)(b) to the extent of supply of produce from cultivation of land.
- Section 23(2) allows the Government to notify additional categories exempt from registration.
- Notification 10/2017-IGST is an important example for qualifying inter-State taxable service suppliers.
- Job-worker registration requires coordinated reading of Sections 22, 23, 24 and the applicable notification.
- Voluntary registration under Section 25 is different from being liable to register under Section 22.
- Section 22, Section 23 and Section 24 must be analysed together.
- For historical matters, always identify the exact notification and effective period.
Disclaimer: This guide is for practical educational and working purposes. GST Acts, Rules, notifications and exemption conditions can change. For a registration decision, notice or historical dispute, apply the law and notifications applicable to the relevant period.